Goodyear Q2 profit nearly doubles despite Europe

JeffBennett

DETROIT (MarketWatch) -- Goodyear Tire & Rubber Co.'s
GT, -0.50%
second-quarter net income nearly doubled after the company's North American unit produced a historic operating profit to offset its underperforming European operations.

Net income was $92 million compared with $47 million from the same period a year earlier. Excluding one-time costs, Goodyear earned 57 cents, exceeding the average analyst expectation of 45 cents. Revenue slipped 8% to $5.2 billion.

The results provide a stark picture on how auto-related companies are being torn in half as they ride the recovery in the U.S. while wrestling with the economic slowdown in Europe.

Operating profit from Goodyear's North American division rose 37% to $188 million, making it one of the best quarters in the company's history even as the number of tires sold slightly fell to 15.4 million. The financial lift came from sales of higher-cost tires and improvements in its production efficiency. Late last year the company closed its higher cost Union City, Tenn plant.

The Akron, Ohio-based company revised its financial outlook saying it now expects North America to generate more than $450 million in operating profit this year instead of 2013. The company has already generated $268 million through the first half of the year.

It was a different story in the European division. Operating profit plunged 85% to $19 million as the number of tires sold dropped to 14.2 million from 17 million for the same period a year earlier. Tire dealers delayed their orders as consumers slowed their purchases. The company took another hit from reduced demand from auto makers.

"We are taking actions to manage our European business through this tough environment and ensure we are well positioned for continued growth," Goodyear Chief Executive Richard Kramer said in a written statement Tuesday. The company slowed production lines at some of its European plants during the quarter. "We remain confident that long-term growth in the global tire industry will continue, but at a slower pace near term than previously forecast due to continued economic challenges, particularly in Europe."

Goodyear now expects that its full-year tire unit volume for 2012 will be approximately 5% to 7% below 2011.

Shares of Goodyear closed Monday at $10.37. The stock has fallen more than 26% year-to-date.

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